Natural Gas sinks as German economy comes to a standstill

• Natural Gas trades below $2.60, risking the uptrend seen since December. 
• Traders are sending gas futures lower as European demand stutters and US Dollar strengthens. 
• The US Dollar Index jumps towards 103.00 after Trump booked a landslide victory in Iowa. 

Natural Gas (XNG/USD) sank in another downbeat day this week, trading over 3% on the downside on Tuesday. Markets seem to have reached the end of their enthusiasm when it comes to pricing in rate cuts by the world’s major central banks. Meanwhile, recent data suggests that the German economy is coming to a halt, while other countries in the Eurozone also start to signal slowdowns in their economic indicators. This means less demand from Europe for Natural Gas. 

Meanwhile, the US Dollar (USD) is not helping as the Greenback is pumping higher on Tuesday. US markets were closed on Monday due to Martin Luther King Birthday, and the US bond market has opened with a bang in Asia. Headlines on former US President Donald Trump obliterating his competition in the first Republican Presidential Candidate runoff for Iowa (which Trump could not win in previous primaries) are moving the needle in favor of the Greenback. 

Natural Gas is trading at $2.57 per MMBtu at the time of writing.  

Natural Gas market movers: Europe’s engine stutters

• Bloomberg issued a report this Tuesday projecting a slowdown in Gas demand from China after its lacklustre economic performance. 
• Qatar and Russia are joining several other big shipping companies by diverting their gas tankers away from the Suez Canal and the Red Sea.
• Several sources are confirming to Reuters that Iran’s revolutionary Guard is being deployed in Yemen with Commanders and advisors being seen on the ground. 
• Norwegian firm Crown LNG is spending $1 billion to build a gas import terminal in India. The commitment comes as the Indian government looks to increase by 15% the use of Natural Gas in its energy mix by the end of 2030.

Natural Gas Technical Analysis: Risk of a breakdown

Natural Gas is flirting with a scenario of a substantial downturn, with the uptrend since December hanging by a thread. Natural Gas prices are residing near $2.55, a level which threatens the ascending trend line starting at the December’s trough and also tests the December 26 low as a second point. Should that ascending trend line be broken to the downside, a full sell-off towards $2.20 could come in the picture. 

On the upside, Natural Gas is facing all the important Simple Moving Averages (SMA) as resistance levels. First up, nearby is the 200-day SMA near $2.75. Next up is the 55-day SMA at $2.85. Last but not least is the 100-day SMA at $2.95, near $3.

The ascending trend line support near $2.55 is currently under pressure and is being tested. Once broken, support near $2.47 could hold some importance to turn the break of the descending trend line into a false break. In case Gas prices further decline, expect to see a full swing decline towards $2.20 and test the low of December.

XNG/USD (Daily Chart)